Ignition Partners Talk Cloud Computing and Virtualization—A Crucial Part of the VC Firm’s Strategy
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—InstallFree, based in Stamford, CT, was formed in 2006 and makes business software that solves compatibility and security problems when employees install Windows programs and upgrades on their desktops. Ignition co-led (with Trilogy Partners) InstallFree’s $8.5 million second-round financing in August last year. The virtualization company is “doing really well,” Fade says. He adds that the company has “significant sales and revenues for their first year” and some “big brand-name customers,” which could potentially make it an attractive acquisition prospect down the road. InstallFree also has a partnership with Amazon Web Services to offer virtual applications.
—Xeround, based in Bellevue, WA, has developed cloud computing and virtualization software for database applications, primarily in the telecom industry. Ignition invested in the company’s $16 million Series B round in July 2008. Xeround’s board includes chairman Harel Kodesh, the CEO of Seattle-based Decho and president of EMC’s cloud infrastructure business, and Ignition partner Adrian Smith. The company has partnerships with Sun and IBM to help telecom companies keep their subscriber data and other information in a unified “intelligent data grid,” instead of having it scattered across different databases.
So the jury is still out on three of the four. But it’s a promising group that should have enough cash to get through the recession and focus on their business customers.
It’s certainly still early days for cloud computing, with many different competing models, so evaluating startups requires much due diligence. “There’s a lot of confusion over the definition,” says Chris Howard, an Ignition associate who spends a fair amount of time looking at cloud-based software and services. “Everyone is ‘cloud enabled.’ Are you really about that, or what are you really doing? You have to sort through all the marketing spin.”
Looking down the road, the Ignition partners’ mantra on cloud computing and virtualization is, “No single model wins.” That means consumers and business customers will want different things for different applications. “If you’ve got an existing application, people don’t want to throw it out and start all over. It’ll be a mix-and-match environment. They’ll use some Azure, some Google,” Silverberg says. For now, though, the undisputed leader is Amazon Web Services. “Amazon is winning with an IT-centric approach,” Cameron Myhrvold points out. Silverberg adds, “They’re leading the charge to the next generation of computing.”
So how can Ignition win in the space? “We win if we can help customers win ahead of the big companies,” Fade says. “We have to understand the timelines of the big companies, and where they’re likely to build vs. buy, where they’ll have gaps and need help. We don’t want to invest in places where they’re investing and it will be in Windows Server in six months. We want to be creating complements to the big companies.”
One big question is whether Ignition’s startups will continue to innovate in a difficult climate, and avoid being marginalized by the giants in the field. “We’re still in the recessionary period,” Silverberg acknowledges. “Nobody expects a robust recovery anytime soon. Not before mid-2010 at least. It’s been a pretty painful period, but this is the time when the best companies get forged. We’re cautious, and we’re making new investments. The terms are more favorable than they were in early 2008, for the investor. I would expect the first half of next year will be a very busy time for companies. There’s going to be a huge backlog for companies looking to raise money. It’ll be a tough and interesting time.”